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Problem 4-19 (Algo) Varlable Costing Income Statement; Reconciliation (LO4-2, L04-3] During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $63 per unit) Cost of goods sold (@ $35 per unit) Gross margin Selling and administrative expenses* Net operating income Year 1 $ 945,000 525,000 Direct materials Direct labor $ -$3 per unit variable; $250,000 fixed each year. The company's $35 unit product cost is computed as follows: 420,000 295,000 125,000 $ Year 2 $ 1,575,000 875,000 700,000 325,000 375,000 Variable manufacturing overhead Fixed manufacturing overhead ($360,000 20,000 units) Absorption costing unit product cost $6 8 3 18 $35 Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings. Production and cost data for the first two years of operations are:

Problem 4-19 (Algo) Varlable Costing Income Statement; Reconciliation (LO4-2, L04-3] During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $63 per unit) Cost of goods sold (@ $35 per unit) Gross margin Selling and administrative expenses* Net operating income Year 1 $ 945,000 525,000 Direct materials Direct labor $ -$3 per unit variable; $250,000 fixed each year. The company's $35 unit product cost is computed as follows: 420,000 295,000 125,000 $ Year 2 $ 1,575,000 875,000 700,000 325,000 375,000 Variable manufacturing overhead Fixed manufacturing overhead ($360,000 20,000 units) Absorption costing unit product cost $6 8 3 18 $35 Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings. Production and cost data for the first two years of operations are:

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Problem 4-19 (Algo) Varlable Costing Income Statement; Reconciliation [LO4-2, L04-3] During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@$63 per unit) Cost of goods sold (@ $35 per unit) Gross margin Selling and administrative expenses* Net operating income Year 1 $ 945,000 525,000 420,000 295,000 125,000 *$3 per unit variable: $250,000 fixed each year. The company's $35 unit product cost is computed as follows: $ Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($360,000 20,000 units) Absorption costing unit product cost Units produced Units sold Year 1 Year 2 20,000 20,000 15,000 25,000 Year 2 $ 1,575,000 875,000 700,000 325,000 375,000 $ Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings. Production and cost data for the first two years of operations are: $6 8 3 18 $ 35 Required: 1. Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net operating income in Year 1 and in Year 2? 3. Reconcile the absorption costing and the variable costing net operating income figures for each year. Complete this question by entering your answers in the tabs below.
Transcribed Image Text:Problem 4-19 (Algo) Varlable Costing Income Statement; Reconciliation [LO4-2, L04-3] During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@$63 per unit) Cost of goods sold (@ $35 per unit) Gross margin Selling and administrative expenses* Net operating income Year 1 $ 945,000 525,000 420,000 295,000 125,000 *$3 per unit variable: $250,000 fixed each year. The company's $35 unit product cost is computed as follows: $ Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($360,000 20,000 units) Absorption costing unit product cost Units produced Units sold Year 1 Year 2 20,000 20,000 15,000 25,000 Year 2 $ 1,575,000 875,000 700,000 325,000 375,000 $ Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings. Production and cost data for the first two years of operations are: $6 8 3 18 $ 35 Required: 1. Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net operating income in Year 1 and in Year 2? 3. Reconcile the absorption costing and the variable costing net operating income figures for each year. Complete this question by entering your answers in the tabs below.
Required: 1. Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net operating income in Year 1 and in Year 2? 3. Reconcile the absorption costing and the variable costing net operating income figures for each year. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Reconcile the absorption costing and the variable costing net operating Income figures for each year. Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Year 1 Variable costing net operating income (loss) Absorption costing net operating income < Required 2 Required 3> Year 2
Transcribed Image Text:Required: 1. Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net operating income in Year 1 and in Year 2? 3. Reconcile the absorption costing and the variable costing net operating income figures for each year. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Reconcile the absorption costing and the variable costing net operating Income figures for each year. Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Year 1 Variable costing net operating income (loss) Absorption costing net operating income < Required 2 Required 3> Year 2
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